Low cost, tax-exempt financing is available to all state and local governments (i.e., cities, counties, townships, school districts, special districts, and authorities) as well as for many tax-exempt 501(c)(3) institutions such as hospitals, universities, colleges and volunteer fire departments. Tax-exempt financing through the sale of tax-exempt bonds offers practical financial alternatives to paying cash for capital expenditures by state and local government units and tax-exempt institutions. Simply stated, a bond is a debt instrument that is issued for a period of more than one year, with the purpose of raising capital by borrowing. The Federal government, states, cities, corporations, universities, and many other types of institutions sell bonds. A bond is generally a promise to repay the principal investment amount along with interest on a specified date.
Many different types of projects may qualify for tax-exempt financing. Municipal assets, airports, public transit facilities and vehicles, school buildings, hospitals, nursing homes, manufacturing facilities and other types of projects may qualify. Financing is generally obtained through the issuance of bonds. In addition to complying with state laws that enable the financing of a project, there is also the need to comply with restrictions found in the federal law. Federal tax law may impose limitations on the dollar amount that can be financed with tax-exempt debt. The Federal tax law considerations are very complex, but have fully been considered and complied with in the capital creation process described herein.